Coal looks set for a bright future as oil prices remain high. But that's not the only reason for coal's popularity.
I never though the day would come when Arthur Scargill may be proved right.
For those who may be too young to remember, Arthur Scargill was leader of the National Union of Miners in the seventies and early eighties. He is probably best remembered for fighting doggedly with the Thatcher Government to ensure that unprofitable British coal mines remained open. He argued that there is no such thing as uneconomic pits -- just pits that lack sufficient investment. He also contended that the closure of 20 unprofitable pits, which were owned by the National Coal Board, would result in the loss of 20,000 skilled jobs forever.
But that was then. Today, coal production has returned to favour with a vengeance as commodity prices climb on the back of soaring demand. And some experts, which include the former boss of UK Coal
(LSE: UKC)
, Richard Budge, reckon that coal mining in Britain may stage a dramatic comeback. Coal may even challenge oil, gas, and biomass as a viable source of power generation.
Interestingly, Budge, who bought the rump of the former state-owned British coal industry, recently announced plans to reopen a mothballed pit in South Yorkshire. In March, he secured financing from Russia's Kuzbassrazrezugol to develop Hatfield Colliery.
Budge also sold the Russian coal miner a 51% stake in power generator Powerfuel.The "clean coal" power plant hopes to tap into the Hatfield coal seams that are reckoned to contain as much as 27m tons of coal. That's enough to sustain production in the area for over 10 years.
Tapping into rich coal seams is also the big idea at Asia Energy
(LSE: AEN)
. The London-based mining firm plans to build Bangladesh's largest coal mine in Phulbari, which may contain almost 600 million tons of coal. However, the project relies heavily on support from the Bangladesh government. Asia Energy also faces a tricky problem of relocating 100,000 nearby inhabitants.
Closer to home, ATH Resources
(LSE: ATH)
is Britain's third biggest coal miner. Through its opencast mines in Scotland, ATH provides coal principally to the electricity generating industry and the domestic coal market. Elsewhere, diversified miners BHP Billiton
(LSE: BLT)
and Anglo American
(LSE: AAL)
also have coal mining interest. And coal mining is high on the agenda at Xstrata
(LSE: XTA)
. It accounts for 40% of group revenues and profits.
It seems that coal has never been more popular, not only as a major component for steel making, but also as an important source of fuel. Eventually, clean coal, which is coal that has been washed of minerals and impurities, may become a fuel of choice.
However, some pundits reckon that the popularity of coal as a fuel hinges on continuing high oil prices. And as long as oil remains significantly higher than $50 a barrel, then coal may remain a viable alternative.
But I reckon that price isn't the only factor that makes coal attractivel. For instance, it is reckoned that the energy value of all the world's coal is well over 100,000 quadrillion Btu. That's enough coal to last us for 300 years. Secondly, coal is mined on all continents except Antarctica -- there are large reserves in the USA, Russia, China, India, Australia and South Africa. Finally, and perhaps most importantly, there are no known geopolitical risks, which suggests a bright future for coal.
So was Scargill right?
Yes. But if you wait long enough, then almost anything is possible.
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